Dorothy soon encounters a fortune teller named Professor Marvel (Frank Morgan in the first of five roles he plays in the film). He guesses Dorothy's situation, acting as if he knew all along. Going in his traveling trailer, he commands her to close her eyes so that he can tell her fortune. While her eyes are shut, Professor Marvel sneaks a look at a photo of Dorothy and Aunt Em, deciding to trick Dorothy into going back home. He tells Dorothy that Aunt Em has fallen ill from grief, causing her to rush back to the farmhouse just as a sudden twister rolls in. Unable to join her family in the locked storm cellar, she takes shelter inside the house and is knocked unconscious by a window which comes loose.

Dorothy discovering that she is no longer in Kansas Dorothy apparently awakens to discover the house being carried away by the tornado, with her and Toto inside. It eventually drops back down on the ground intact. Opening the door and stepping out of what was up to then a sepia-toned black-and-white film into full three-strip Technicolor, Dorothy finds herself in a strange village. Glinda, the Good Witch of the North (Billie Burke), arrives magically via a bubble. She informs Dorothy that she (or rather her falling house) has killed the Wicked Witch of the East.

The timid Munchkins come out of hiding to celebrate the demise of the Witch by singing a medley that includes "Ding-Dong! The Witch Is Dead". Their celebration is interrupted when the Wicked Witch of the West (Margaret Hamilton) magically appears and tries to claim her sister's powerful ruby slippers. However, Glinda uses her powers to transfer the slippers from the dead witch onto Dorothy's feet and reminds the Witch of the West that her power is ineffectual in Munchkinland. The Witch vows revenge on Dorothy (uttering her famous line, "I'll get you, my pretty. And your little dog, too!") before leaving the same way she arrived. Glinda advises Dorothy to seek the help of the mysterious Wizard of Oz in the Emerald City, which she can reach by following the yellow brick road. She warns Dorothy never to remove the slippers or she will be at the mercy of the Wicked Witch.

On her way to the city, Dorothy meets a Scarecrow (Ray Bolger) with no brain, a Tin Man (Jack Haley) with no heart, and a Cowardly Lion (Bert Lahr), who can all talk, and the three decide to accompany Dorothy in the hopes that the Wizard will also give them their desires. Along the way, they behave in ways which demonstrate that they already have the qualities they believe they lack: The Scarecrow has several good ideas, the Tin Man is kind and sympathetic, and the Lion is ready to face danger, even though he is terrified.

After Dorothy and the Cowardly Lion nearly succumb to one of the Witch's traps, the foursome enter the Emerald City. They are given an audience with the Wizard of Oz, who appears as a disembodied and imposing head. In a booming voice, he states that he will consider granting their wishes if they bring him the Wicked Witch's broomstick.

They set out for the Witch's castle, but she detects them and dispatches her army of flying monkeys; they carry Dorothy and Toto back to her. When the Witch threatens to drown Toto, Dorothy agrees to give up the slippers, but a shower of sparks prevents their removal. While the Witch is distracted, Toto escapes. The Witch says that the shoes cannot be removed unless Dorothy dies; she leaves to ponder how to accomplish this without damaging the shoes.

Toto finds Dorothy's friends and leads them to the castle. After ambushing some of the Winkie guards, they disguise themselves in the guards' uniforms, enter, and free Dorothy. The Witch and her soldiers pursue and corner the group on a parapet. The Witch sets the Scarecrow's arm on fire, and Dorothy throws water on her friend to put out the flames, accidentally splashing the Witch. To the Witch's horror and everyone's surprise, the Witch melts away. The soldiers are delighted, and their captain (Mitchell Lewis) gives Dorothy the broomstick.

Upon their triumphant return to the Emerald City, Toto exposes the Wizard (Frank Morgan) as a fraud, opening a curtain and revealing a non-magical man operating a giant console of wheels and levers. They are outraged, but the Wizard solves their problems with common sense and a little double talk. He explains that they already had what they had been searching for all along and only need things such as medals and diplomas to confirm it. The Wizard reveals that he too was born in Kansas and that he was brought to Oz by a runaway hot air balloon. He offers to take Dorothy home in the same balloon, leaving the Scarecrow, Tin Man and Cowardly Lion in charge of the Emerald City.

Just before takeoff, Toto jumps out of the balloon's basket to chase a cat. Dorothy follows him, and the Wizard, unable to control the balloon, leaves without her. She is resigned to spending the rest of her life in Oz until Glinda appears and tells her that she has always had the power to return home. Glinda explains that she did not tell Dorothy at first because she needed to find out for herself that she doesn't need to run away to find her heart's desire. Dorothy says a tearful goodbye to her friends and then follows Glinda's instructions, closing her eyes, tapping her heels together three times, and chanting "There's no place like home."

The film reverts to sepia tone and Dorothy awakens in her bedroom in Kansas, surrounded by family and friends, suggesting she was unconscious the whole time. She tells them of her journey, but Aunt Em tells Dorothy that it was all a dream, but Dorothy pleads otherwise. In any case, Dorothy promises everyone that she will never leave home ever again, for she loves them all, and that there's no place like home.

Differences from the original novel
Many details are omitted or altered, while many of the perils that Dorothy encountered in the novel are not even mentioned in the feature film. The Good Witch of the North (who has no name in the book) and Glinda, the Good Witch of the South, are merged into one omniscient character. To take advantage of the new vivid Technicolor process, Dorothy's silver shoes were changed to ruby slippers for the movie. Due to time constraints, a number of incidents from the book, including the China County and the Hammerheads, were cut. The role of the Wicked Witch of the West was also enlarged for the movie (in the book, she is only present for one chapter) to provide more dramatic tension throughout the film. The novel also never depicts Dorothy as a damsel in distress to be rescued by her friends, but rather the reverse, with Dorothy rescuing her friends.

Nevertheless, the film was far more faithful to Baum's original book than many earlier scripts or film versions. Two silent versions were produced in 1910 and 1925 and the seven-minute animated cartoon in 1933 (the 1925 version, with which Baum, who had died six years earlier, had no association, made Dorothy a princess of Oz, rather like the later sci-fi TV miniseries Tin Man). The 1939 movie interprets the Oz experience as a dream, in which many of the characters that Dorothy meets represent the people from her home life (such as Miss Gulch, Professor Marvel and the farmhands, none of which appear in the book). In L. Frank Baum's original novel, Oz is meant to be a real place, one to which Dorothy would return in the author's later Oz books and which would later provide a refuge for Aunt Em and Uncle Henry when unable to pay the mortgage on the new house that was built after the old one really was carried away by the tornado.
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Cast
Judy Garland as Dorothy Gale

The Singer Midgets as the Munchkins
In the film credits, all actors with more than one role are listed only as their Kansas characters, not their Oz characters. The dog Toto is listed as having been played by himself, not by Terry, her real name. Uncle Henry is the only character to appear in Kansas without appearing in Oz (Aunt Em appears in Oz in the hourglass scene).